_Exam One Review Part Two.docx - BUSINESS ETHICS I Ethical...

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BUSINESS ETHICS I. Ethical Theories Business Ethics - The application of moral and ethical principles in a business context. A. Egoism - The belief that an action is morally right if the action’s consequences are more beneficial than unfavorable. B. Utilitarianism - An action is evaluated in terms of its consequences for those whom it will affect. A “good” action is one that results in the greatest good for the greatest number of people. C. Kantian - Individuals should evaluate their actions in light of the consequences that would follow if everyone else acted in the same way. D. Religious-based - Values driven by religion. E. Stockholder - An individual, group, or organization that holds one or more shares in the company. F. Stakeholder - Groups that are affected by corporate decisions including: employees, customers, creditors, distributors, suppliers, community, stockholders/investors, government, or competition. G. Social Contract - An agreement made between people to act in certain ways not because the acts themselves are good or bad, but because the rules for action are mutually beneficial. Corporations should strive to be “good citizens.” When making decisions, a business should evaluate each of the following: 1. The legal implications of each decision. 2. The public relations impact. 3. The safety risks for consumers and employees. 4. The financial implications. In attempting to maximize profits, corporate executives and employees have to distinguish between short-run and long-run profit maximization. In the short run, a company may increase its profits by continuing to sell a product, even though it knows that the product is defective. In the long run, though, because of lawsuits, large settlements, and bad publicity, such unethical conduct will cause profits to suffer. Thus, business ethics is consistent only with long-run profit maximization. II. Corporate Culture and Governance / Encouraging Ethical Behavior / Risk Management A. Code of Ethics - showing ethical issues, the company clearly indicates concern about. Commitment from top management; is a statement of values and principles that defines the purpose of the organization. B. Hotlines - Communication method in which an employee anonymous or non anonymous can bring forth unethical behavior. C. Whistleblower protection - protection for workers who report misconduct. Whistleblower - Someone in the company who reports any wrongdoing by the company. Comes with risk as it can cause friction between employees, employers, and future employers. 1
D. Ethical training - training employees on acceptable ethics in the company. A company is subject to the dangers of unethical acts or unprincipled behavior when it seldom or never monitors its code. This then increases the risk of corporate liability for wrongdoing and decreases productivity.

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